In this episode I’m going to blow the lid on a secret which very few people know, but will transform how you manage your money and your business:
LEVERAGE
Not many people really understand what it is or how to use it, so I am going to break it down for you, and explain on this podcast how you can use leverage successfully. Then, you need to listen to my previous episodes, use the tools I provide on my website, and I promise you will start to see the change you want in your life and business.
I also offer a valuable freebie to a limited number of listeners, so make sure you listen until the end of the episode to find out more!
Links & Resources:
Highlights from this episode:
(00:39) Leveraging strengths
(05:09) Put choice on the table
(11:32) It’s easy to start a doomed business
(14:32) Property and business are both lendable
(17:04) Are you spending time on things you don’t value?
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Connect with Vicki:
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Browse Books by Vicki:
Using Other People’s Money: How to invest in property 4th edition
Make More Money from Property: From investor thinking to a business mindset 2nd Edition
Property for the Next Generation: Securing your future in uncertain times 2nd Edition
The New Estate: Insights from the 22nd century
The Wealthy Retirement Plan: A revolutionary guide to living the rest of your in style
Or read the following Ebooks on VickiWusche.com:
9 Critical Property Principles
The De-Job Yourself Manual: Break your reliance on a monthly wage
The Values Manual: Understand what your values are and how they can be key to a successful business
The Goal Setting Manual: Create meaningful and practical goals then achieve them
Episode 013 Transcript – Are You Throwing Away an Opportunity?
Hello there and welcome to episode 13 of A Wealthy Life, “Are You Throwing Away an Opportunity?” We’re talking about Principle Four of the Five Principles of a Wealthy Life. And this is a secret only known by a few, and even fewer actually understand Leverage and what it is.
Leveraging Strengths
So, it’s a skill. And we understand the term “to lever,” if I need to lift something heavy and I can’t manage on my own, I could ask a friend to help. And I could leverage their strength, use their strength, to join with my strength and make it so that there were two energies pushing together to lift up something that was heavy, or to carry something that was heavy.
If it didn’t have a friend to help me, I could wedge a lever under the object and I could put something under the lever. And then by doing some science-y stuff–I’m sure it’s physics–press on the end of the lever and exert more force so that I could move the heavy objects. Clearly science wasn’t my strong point, you can tell, but you get the gist.
And if I do a maths example, okay–sorry, stay with me here–I could buy one house for 100,000 pounds and get 600 pounds a month. Or, I could take those 100,000 pounds, split it up into 25,000 [pound] deposits, and buy four houses using a mortgage. So, 25% deposit is 25,000; 75,000 pounds is done on a mortgage. And then after I’ve paid back the mortgage, I could end up with something like 4×300 pounds a month as my cashflow. And that would give me twice the amount of money as if I had just bought one house.
Yeah, don’t get hung up on the property example. The point was that there is maths, there is physics, there is science here. Yes, honestly, I did try not to, but there’s maths in here again! And you’re going to get used to this, I’m going to weigh you down so that you absolutely love it. And when I finally understood financial leverage, for me, and how it worked–and, I know that the maths made it easier for me to see–I could actually see Leverage in so many places.
Take a trip to a supermarket. And if you’re old fashioned, rather than doing “click and collect,” you might pick up a basket, and what you could do is you could put that basket on your arm and you could load your shopping in, and that basket would get heavier and it would make your arm ache, and your shoulder ache. Or, what you could do is you could create and invent something like a basket on wheels, which we call a trolley.
So, you take a basket and you stick a wheel in each corner and a handle. And now you put the same goods into your trolley and instead of it making your arm and your shoulder ache, the weight is spread out through the wheels in the four corners and makes it easier for you to just push it along without any weight.
Put Choice on the Table
That is the example of Leverage in action. We are using the trolley to make life easier. And let’s think, for example, that you’re in a business and that you’re going to employ a skilled member of staff that loves doing, maybe, accounts or social media posts and postings, and they’re much better at it than you. And quite frankly, employing them is a better use of your time; it’s leveraging their time on your behalf. Because one, they’ve got the skill and they’ve got the passion to do the job that you have half the skill and very little passion to do. And you can earn more by doing what you do and what you’re skilled to do and pay them and still make a profit. So, that is how, basically, employers leverage the time of staff.
They employ staff to do jobs, instead of doing them themselves. They can get more jobs done more easily by picking the right members of staff. And they can then focus on managing and coordinating or going off doing sales or being, you know, the head of the business and bringing in business, whatever it is.
And that actually generates more money than if they were there on the shop floor, in a factory or in retail or in an office. That’s Leverage in action. And now, what you can do when you’ve employed your staff is you can take the profits that you make from outsourcing all of that work, and either have more money in the business or choose to have more time.
All of a sudden choice is there on the table for you. Because you’ve leveraged, you’re now in a position where you have more choice. And once you understand Leverage, you will see it everywhere. And that is what’s important, and that’s what I want you to do.
Now, the next point about Resources–it’s all well and good having the resources in the list as we did in the last episode–but it’s now about using those assets, those resources, wisely. And this is another skill; from advanced strategies, like making sure that you are utilizing your tax benefits, to simply understanding interest rates–both on how you spend your money and how you save your money. As a practical exercise, you need to be thinking that when you do that resource list, your assets, have you got any money that is a debt on a credit card that is incurring interest? Because that’s actually something that will detract value from the resources, the collective resources that you have. And so, what you need to do is address that.
With time as an example, it’s, for me, a finite and precious resource. You could say to me, “Vicki, could you lend me a pound?” And I could lend you a pound. But if you say to me, “Vicki, can you lend me an hour or five minutes?” I can’t. I can’t give you time and make you have more time; I can only share the time I have with you. And in a sense, that’s what we’re doing here on the podcast. I am sharing my time with you and you are sharing your time with me. Time is such a precious resource, and that’s why I’m so grateful that you spend your time and you’ve listened with me. And I want to make sure that I give you maximum value while you’re here.
Don’t waste time. And maybe this is a moment to revisit the exercise on focus, again, that was back in Episode 10 on Clarity. The title of the episode was called, “What Are You Afraid Of?” What is your focus, and is your time supporting you to achieve the wealthy life you want to live? The assets you made a list? Do you understand what you have, what you can control, what you own? Is there any weakness in your asset list like, do you have any debt that is incurring interest that you can deal with?
So now what you can start to do is when we step back and take a bigger picture resource allocation. So, here’s my list; what of the assets that I have–my time, my money, my knowledge contacts, experience–what are they doing to support me to achieve the life I want? And are there any of my resources, for example, some of my money as a debt on a credit card, that’s actually pulling me back the other way? And so, you can start to look at your resources and make sure that they’re all facing in the right direction, that they are all supporting you on this journey.
And then what you can start to do is look at what asset you have that you could leverage to create more cash flow in your family, and therefore, ultimately give yourself more time. Yeah, this is quite complicated as an example, because I can’t hear your answers no matter how much you shout at me. But let’s just imagine a month, through some of these; and if this one isn’t exactly relevant, you can take it as a metaphor and work out what would be relevant for you, or drop me an email.
It’s East to Start a Doomed Business
So, you’ve got spare time on your hands. Could you combine your spare time with something you know how to create that maybe others would pay for? A classic example of this is all of the entrepreneurs that you see on websites like Etsy. And quite frankly, anything that you see that young people have, basically, created. So, whether it’s this idea of delivering food on a bicycle and getting your mates to start delivering food on a bicycle and all of a sudden, you’ve got a food delivery business. It could be a lot of new companies coming up now.
So, the adverts on the television, certainly in the UK, are around: you went to make some dinner, or you went to change the baby’s nappy and you suddenly realized you’ve run out of a product. So, in very localized areas, there are there’s immediate, quick responses that they can bring you something that you forgot from the shopping. And this is taking online shopping to another level, isn’t it? So, you can plan in advance what shopping you want and get it delivered in a slot by your supermarket, or you can have an emergency and basically get in touch with someone and they will bring you your emergency product within the next half an hour or an hour or whatever they promise.
Do you have a spare room in your house? Could you rent your room out and create an income? There are so many ways that we can think about generating more income. Do you live in London, have a drive and not have a car? Or any major city, quite frankly, anywhere in the world; do you live in a major city and not have a car, because often when you live in a major city, there’s no point having a car. Could you rent your drive to somebody who wants to come into town into the main city by public transport? And we know how expensive parking is. Could you rent it out as a parking space?
So, I can’t say that any of those examples that I’ve just given you have worked well for me; starting a business is hard and I’m sure you know that, and it will take time to get the returns, and get returns in a sufficient amount that you’re going to feel successful.
I’m not talking years and years, but it’s just, it’s much easier if your business–and there’s a big if here–if your business is focused on exactly the right market that are prepared to pay the right price, that makes it worth your while to start the business and sell your goods in the first time. And that’s the real skill.
It’s very easy to start a business that is doomed not to be successful and not to be worth your time and your effort. So, starting a successful business is hard. I think really for me, I probably was building up my knowledge, my experience, my team, working on my business model for maybe close to two full years before I helped my first client and got my first invoice paid, if you want to think of it that way round. And it was probably another two years after that until I really felt like I had got a good business machine and that it was working well. So, it takes time.
And then the other side of it, I just said, you know, share a room with a stranger or rent out your drive. I don’t live somewhere that somebody would want to rent our drive. And I don’t really feel like I want to share my house with a stranger, but I’ve got a friend who has done this for years; she has rented rooms repeatedly to a delightful range of people, some of which have gone on to be long-term friends. And then she’s gone on to continue to see them when they’ve moved off and got married and got a family of their own.
And it’s not for me–and I can use the word, “but” quite deliberately here–“but it’s not for me” because it’s not for me. It could be for you. And so, for me, what I found is that combining my knowledge and my money into a property business that was my own business, was an easier route for me to generate more income for less time. And I know we all meet people who want somewhere to live; there’s a shortage of decent and affordable housing.
Property and Business Are Both Lendable
And so, again, with the help of my trusted spreadsheet, I could easily identify the mathematical place where it made sense for the business to work. And the way that I did that was to use something called “return on investment.” I wanted to understand if I was going to invest my money into something where I would get the best rate of return. And then what I did, as I said, is I leveraged that knowledge and I’m still leveraging that knowledge gain through nearly 20 years of investing, to offer my experience, my team, as a service to my clients.
So, they could already see the benefit of investing their money into property and they didn’t have enough time or knowledge or experience to, or desire to, want to make that business growth curve for themselves. So, they leveraged my knowledge, my experience, and my team, to make it to the point where their businesses worked and proved profitable much more quickly with less of their time involved in that journey. So again, it’s Leverage.
Now. Let’s just have a quick look at business leverage versus property leverage. Now, property and businesses are both forms where a bank will lend money. You cannot get alone to buy a share or a bond unless you sort of cheat and, you know, take out personal loans, but let’s stay on the thought path for a moment.
So, property and businesses are both places that banks consider a lendable venture, shall we say. So, you could have an idea and a clear market, take out a business loan, generate a great product or a service, sell it for a profit… And what happens then is that most business owners who will have started that business as a one-person band, or maybe at best a partnership, doing all the hard work in those early years, they may get themselves a mentor to Leverage their success journey. But generally, they are on a medium-term route to income that will require a lot of their time.
Are You Spending Time on Things You Don’t Value?
And if you are running a business now, the chances are, like a lot of my clients, you are working long hours. And the last couple of years have probably made you work more hours than you would have done. If you’ve got a staff team, you will have the pressure of looking after that staff team. You have to get the sales machine fed. That’s the thing with a legitimate, regular business in the true sense that it’s got a product or a service and you have to keep making the product or the service, unless you can automate it.
And even if you automate it, you have to keep making the sales. Whereas property, as an example, has quite a long sale life, if you like. I sell, I rent the property to the tenant and they stay there anything from six months to six years to 10 years. So, one sale, one effort of marketing, can then just generate the income for quite a long period. In making the product, in making the house a rentable product, I do the work up front and that work lasts for a long time.
So, for me, you can see that alongside loving maths. I love my time. My time is precious to me. So, I’m very conscious that I don’t want to spend my time doing things that I don’t enjoy or that I don’t value. And I’m sure you feel the same.
If you are spending time doing things you don’t enjoy, you don’t value, I wonder how successful you can be at those things? How much pleasure you can get from them? So, if like me, you value freedom, choice, financial security, and maybe helping others. Then, for me, investing in a property–typically a house where I can leverage it with a mortgage, fill it with a tenant, get a return on the income that’s both worth my time and my money, and feeds my values of, “I can still be free. I can still move around.”
If I want to have a holiday, then I won’t try and buy a house just in those few weeks before–and you can see, I used that word “try,” it’s not going to happen–I won’t start any major renovations. If I know that I’m going to be away for a month, I’m not going to be there to supervise them. I will have a team that can take care of the tenant while I’m away. So that gives me freedom and choice and flexibility.
The financial security comes from the systems that we have in place to manage the business, and also from the fact that when I’m away on holiday and I’m not earning direct money by selling my time for money like we do in jobs, I know that there is still income coming in through the property side of the business. So, then I’ve got financial security.
And underlying all of this is the fact that I am helping others in two ways. I’m helping my tenants have a decent house to live in, which puts them on the strong path that I had so that they can move forward with their lives. And I’m helping my clients invest in a property business, which will put them in a position where they have income coming in, and them not having to spend a lot of time working for it because we’re leveraging my knowledge and my team.
That’s how Leverage can work with your various assets. And you’ve got to think now back to that last episode: what was the list that I created? And how can I make sure that those assets are working for me, and which of those assets can I actually start to leverage? And notice Leverage as examples in your life; where can you see Leverage working so that you start to add this word into your vocabulary, add this word into your consciousness?
Again, I’ve got to go back to that first episode about “Property Helped Me Retire at 48,” and say when I spoke to you about focus, I said “the focus sharpens.” And the way that it sharpens is because as you get closer to the thing that you’re focused on, you surround yourself with people and language and knowledge and skills and experience that help you see more clearly. This word “Leverage” is one of those things.
If you start to notice Leverage as it is around you, you will then be in a position where you’re going to sharpen your focus on the thing that is going to create your wealthy life for you. So now, how are you going to get your resources to support you with your focus on a wealthy life? How are you going to understand the different ways that you can Leverage your resources?
Notice, Leverage; this is something that you need to now think on to build into your life. Because the purpose of this episode was really to pant that fourth seed, Leverage. Very much a skill that first you notice, then you learn, then you apply. And in some ways, it’s almost the easiest of the Five Principles, because you can take your list of resources and then make them line up and support you, and support the Clarity that you’ve already identified. But if you’re not familiar with it, then you will need to go through that recognition and absorption of the word and the concept.
Well, what I’m going to do now is I’m going to offer you two things. I’m going to offer 10 complimentary calls in case you’re stuck with this. I really want you to understand and embrace the Principles as we move forward.
And one more lesson for you. As you listened to this podcast and I ask if you would like a call, the worst thing I could say to you is “I’m very sorry, I’m completely busy that day. I don’t have enough time,” and you’ll know that it’s because I’m living my Wealthy Life. But I will, or rather I should say, and I will, help you as soon as I can. If you don’t ask you definitely won’t get.
I’m just going to leave you with that little thought, and remind you that I am going to share in the next episode the Audit that will help you measure yourself against these Five Principles. You know to put in your diary next Thursday so we can start talking about Legacy, which is quite an exciting one of the principles; it really moves you forward.
I want to just thank you as always for your precious time listening to A Wealthy Life Podcast. My name is Vicki Wusche, and I hope that this episode has brought you some much needed “Whoosh” in your life.
You’ve been listening to Vicki Wusche, wealth strategist, author, and property investor. With a name like ‘Wusche’ spelt W-U-S-C-H-E, I’m easy to find on all the usual social media channels. Do come and connect.
Been loving the podcast? Then join the Listener Fan Club where I will share extra insights and host webinars. Links to this, and more of my story are both in the show notes and on my website, vickiwusche.com. See you on the next episode.